Wednesday, March 09, 2011

Wednesday Watch

Posted by Gary .....at 1:04 AM

Evening Headlines
Bloomberg:
  • Oil Falls for a Second Day in New York as OPEC Discusses Emergency Meeting. Oil dropped for a second day as members of the Organization of Petroleum Exporting Countries considered talks about increasing production as fighting disrupts supplies from Libya. Futures dropped as much as 0.6 percent after Kuwait’s oil minister said OPEC members are weighing an “urgent” meeting to determine whether more output is needed, as Libyan rebel fighters prepared an offensive to regain a town lost to Muammar Qaddafi’s forces. U.S. crude supplies rose the most since November last week, the American Petroleum Institute said. Crude for April delivery decreased as much as 66 cents to $104.36 a barrel in electronic trading on the New York Mercantile Exchange, and was at $104.42 at 1:07 p.m. Sydney time. Yesterday, the contract lost 42 cents from the previous settlement of $105.44, the highest since Sept. 26, 2008. Prices are up 28 percent from a year ago.
  • Portugal Must Boost Investor Trust as Yields Rise, Ambassador to U.S. Says. Portugal must shore up investor confidence by meeting deficit-reduction targets and spurring economic growth, Nuno Brito, the country’s ambassador to the U.S., said as the nation prepares to sell 1 billion euros ($1.39 billion) in debt with yields hovering close to record highs. “One of our main tasks is to rebuild trust,” Brito, who assumed his post last month, said in an interview at Bloomberg News headquarters in New York yesterday. “We have no option but to be overambitious.” Portugal’s 10-year bond yield reached 7.636 percent on Feb. 10, the highest since at least 1997, according to data compiled by Bloomberg, as concern mounted the nation will need to follow Greece and Ireland in requesting a bailout from the European Union and the International Monetary Fund. Portugal’s sale of up to 1 billion euros of September 2013 notes today will be its second debt auction this year.
  • China Says Property Demand Driven by 'Unreasonable' Speculation. China’s rising property market in the past few years was driven in part by “unreasonable” demand from speculators, according to Qi Ji, Vice Minister of Housing and Urban-Rural Development. “The government’s property curbs are targeted principally at those who don’t have an immediate need for housing as accommodation,” Qi said in a press briefing in Beijing today. “Our basic aim is to direct the limited supply of housing to those who need it the most.”
  • BofA(BAC) is 'Very Active Seller' Of Commercial Real Estate, Risk Chief Says. Bank of America Corp. (BAC), the biggest U.S. lender, is a “very active seller” of commercial real estate as the firm seeks to limit losses on assets accumulated through acquisitions, Chief Risk Officer Bruce Thompson said. Commercial real estate loans in the core portfolio fell 28 percent in 2010 to $48 billion at the end of the year, the Charlotte, North Carolina-based lender said in a presentation on its website today. The decline is part of the company’s strategy to reduce so-called legacy assets, Thompson said today at an investor presentation. Thompson is working with Chief Executive Officer Brian T. Moynihan to decrease the chance of writedowns after the company repaid U.S. bailout funds that were required to bolster capital drained by lending losses.
  • The U.S. Department of Homeland Security has shut down a website used to disclose the way the department intends to spend money. The Advanced Acquisition Planning system enabled government program managers, private vendors and the general public to track the more than $13 billion in federal contracts issued by the agency every year, according to Bloomberg data. "The system was retired by the Department of Homeland Security on Feb. 28, 2011," according to a statement on the website. No explanation was provided. Federal acquisition regulations require that an advanced acquisition plan be done for any contract expected to exceed $100,000 in order to maximize opportunities for small business participation.
  • California No Longer 'Magnet' as Rate of Population Growth Slows in Census. California saw higher growth in its inland cities and counties than on the coast and found double- digit increases in its Asian and Hispanic populations over the past decade, according to 2010 Census data released today. Coastal areas tended to be “hostile to business” and development, while jobs and cheaper housing drove people inland, according to Joel Kotkin, author of, “The Next Hundred Million: America in 2050,” a book published last year about the nation’s demographic changes.
  • Australian Climate Plan Has 'Backfired' on Gillard, Lawmaker Windsor Says. The Australian government’s handling of climate change has “backfired” and Prime Minister Julia Gillard may not get a chance to submit the legislation to parliament, independent lawmaker Tony Windsor said. “I think this has backfired on the government,” Windsor, also a member of the Labor government’s multiparty climate change committee, said today in a phone interview from Bundarra, New South Wales state. “I think people want to see the detail of the climate plan rather than just the framework.” Gillard’s support fell to a record low in a Newspoll published in the Australian newspaper yesterday as voters rejected Gillard’s climate plans. The government wants to introduce a carbon price it hasn’t set from July next year before moving to an emissions trading plan, according a document released by its multiparty committee.
  • Hacking of DuPont(DD), J&J(JNJ), GE(GE) Were Google(GOOG)-Type Attacks. The FBI broke the news to executives at DuPont Co. late last year that hackers had cracked the company’s computer networks for the second time in 12 months, according to a confidential Dec. 9, 2010, e-mail discussing the investigation. About a year earlier, DuPont had been hit by the same China- based hackers who struck Google Inc. (GOOG) and unlike Google, DuPont kept the intrusion secret, internal e-mails from cyber-security firm HBGary Inc. show. As DuPont probed the incidents, executives concluded they were the target of a campaign of industrial spying, the e-mails show. The attacks on DuPont and on more than a dozen other companies are discussed in about 60,000 confidential e-mails that HBGary, hired by some of the targeted businesses, said were stolen from it on Feb. 6 and posted on the Internet by a group of hacker-activists known as Anonymous. The companies attacked include Walt Disney Co. (DIS), Sony Corp. (6758), Johnson & Johnson, and General Electric Co., the e-mails show. The incidents described in the stolen e-mails portray industrial espionage by hackers based in China, Russia and other countries. U.S. law enforcement agencies say the attacks have intensified in number and scope over the past two years. “We are on the losing end of the biggest transfer of wealth through theft and piracy in the history of the planet,” said Democratic Senator Sheldon Whitehouse of Rhode Island, who chaired a U.S. Senate Select Committee on Intelligence task force on U.S. cyber security in 2010.
Wall Street Journal:
  • U.S. Sees Stalemate Emerging in Libya. The U.S. believes Col. Moammar Gadhafi has solidified control in parts of Libya, creating a stalemate with rebels and raising the stakes in the Obama administration's internal debate about whether to take military action to help the opposition, officials said. Pro-regime forces pressed into the rebel-held city of Zawiya, near the capital, and appeared to have halted the opposition's momentum to the east in fighting Tuesday. With the struggle appearing to settle into a standoff, the Obama administration, working with allies, looked into options for intervention, while the European Union prepared to announce broader sanctions on the Libyan government, including an asset freeze. Rebels in their base in the eastern city of Benghazi, after first suggesting they had made an amnesty offer to the Libyan leader, denied any back-channel negotiations were under way.
  • China's Debt Burden Limits Policy Leeway. New Chinese government figures show its national debt load remains low compared with other major economies. But including the debts of local governments and many parts of the state-owned banking sector, as many economists say is proper, shows the constraints facing Beijing in the fight against inflation, its top economic priority. Adding up the official debt data from these other parts of the government as well as from state banks and estimated debt of asset-management companies puts China's total government liabilities at $3.55 trillion, equivalent to 59% of GDP. Some economists who follow the issue say those official data underestimate items like nonperforming loans created by a lending surge over the past two years. Stephen Green, China economist at Standard Chartered Bank, estimates total debt, including contingent liabilities, at 77% of GDP. Arthur Kroeber, managing director of Beijing-based research firm Dragonomics, puts the total debt at 75% of GDP.
  • In Health Law, Rx for Trouble. A provision intended to limit tax breaks for over-the-counter drugs in the health-care overhaul is creating headaches for doctors and new complications for retailers and pharmacies.
  • US Official: Pressure Is On Emerging Economies to Change Ways. Emerging economies such as China and India must take steps to improve the openness and access to their markets, a top State Department official said Tuesday, both for the success of international trade talks and the broader effort to rebalance the global economy.
  • Europe Blinks on Bank Test. Regulators Seen Easing 'Stress' Gauge, Undercutting Effort to Restore Confidence. European officials are poised to let regulators in individual countries use their own definitions of a key gauge of banks' health in coming "stress tests," threatening to undermine efforts to buttress faith in the Continent's ailing financial system. The new European Banking Authority, which is running the tests on 88 of Europe's biggest banks, has told regulators and bankers that the exams are likely to rely on each country's definition of an important capital ratio known as Tier 1, according to people familiar with the matter. If the plan goes through, some skeptical bankers and regulators worry, it could undermine the effort to end the European financial crisis. They fear a rerun of one of the key weaknesses in last year's stress tests by the European Union. Those results were widely panned for giving passing grades to almost all banks, including some that subsequently required taxpayer bailouts. Last year, regulators let each country use a local standard of the Tier 1 capital ratio, a measure of a bank's ability to withstand unexpected losses. That flexibility wasn't widely known when the results were announced, and the differences made it difficult to compare banks across Europe. The latest stress tests would essentially repeat the same process. Banks that fall below a certain capital threshold in a deteriorating economic environment will be forced to raise more capital. The trouble is that regulators in different countries have different methods of calculating the Tier 1 ratio. The stress tests are unlikely to establish a pan-European standard, according to the people familiar with the matter. Some regulators and bank executives worry that the lack of uniformity will damage the tests' credibility. "We're falling into the same trap," said an official at a major European bank.
  • Unions Oppose Pension Changes in California Talk. A coalition of influential labor groups in California opposes some public-pension changes that Gov. Jerry Brown has considered as part of a compromise with Republican lawmakers, further complicating the governor's hope for a quick resolution to budget talks to close a $26.6 billion deficit, said people familiar with the matter.
  • Seasoned Prosecutors Prep for 'War'. For the next 10 weeks, prosecutors will battle Galleon Group founder Raj Rajaratnam in courtroom 17B in lower Manhattan. But they will win or lose the insider-trading case in a nearby "war room."
  • Our Man-Made Energy Crisis. There's plenty of oil and no fundamental reason to expect prices of $200 per barrel. But that doesn't excuse the administration's punitive approach toward the industry.
CNBC:
  • An Open Letter From an Egyptian CEO. The following is an open letter written by the CEO of a large company based in Egypt. He is not being named out of retribution fears and concerns for his safety ... The situation worsening ... the military is barely holding on ... anarchy extending ... and the original young demonstrators are marginalized already. The economic meltdown is huge. If I may make some suggestions ...
  • Welfare State: Handouts Make Up One-Third of U.S. Wages. Government payouts—including Social Security, Medicare and unemployment insurance—make up more than a third of total wages and salaries of the U.S. population, a record figure that will only increase if action isn’t taken before the majority of Baby Boomers enter retirement. Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data.
Business Insider:
Zero Hedge:
Forbes:
  • We Suffer Unhealthy Budgets, Thanks to ObamaCare. This year's budget battle is only the beginning. Thanks to the new health care law, next year's budget debate is shaping up to be a real battle royale. In mid-February, President Obama released his 2011-2012 budget proposal, which would take effect this year on Oct. 1. Missing from that document was any accounting of the true cost of implementing ObamaCare. "How many federal bureaucrats does it take to carry out President Barack Obama's health care overhaul?" wrote the Associated Press. "Don't expect to find an easy answer in his new budget." The president's budget is so opaque that Rep. Dave Camp, R-Mich.--the chairman of the House Ways and Means Committee, which oversees Medicare and tax laws--has wondered whether Democrats are now trying to hide the costs of their signature piece of legislation. In reality, the president and his congressional allies have obscured the costs of ObamaCare since the beginning. In March of last year, for instance, just a few days before the health care bill became law, the Congressional Budget Office (CBO) identified "at least $50 billion" in costs associated with implementing the law for which the "authority to undertake such spending is not provided." Just a few months later, the Congressional Research Service stated that the number of new federal bureaucracies created by the health care law was "unknowable." So the White House is either hiding the cost of implementation--or simply doesn't know what that cost will be.
  • Are We Thwarting Medical Innovation? The movement to repeal the health care reform act in the U.S. merely touches the surface of a deeper problem. A better “repeal” agenda would focus on undoing, and re-thinking, much of the FDA regulatory regime and other barriers to innovation in health care. Anyone who has benefited from an MRI exam, a new drug therapy or a high-tech surgical procedure knows the value of biomedical innovation. And anyone with a disorder that still defies effective care knows the need to keep innovation going. What’s more, this innovation pays multiple economic benefits. For over a century, new medical treatments and the businesses that bring them to market have employed millions of people, helping the rest of us to be healthier and more productive in our own lines of work. Yet lately the virtuous cycle has begun to bog down. In the past 15 years, despite a doubling of federal funds for biomedical R&D, the number of new drugs approved by the FDA and coming to market has decreased by nearly half — from around 40 per year in the late 1990s to a little over 20 per year since 2005. Pre-market testing to meet FDA requirements has become such a huge factor in drug development budgets that it’s hard for companies to even consider working on new products with limited market potential. Other obstacles have grown too, mostly from a long-running accretion of government controls and bureaucratic bottlenecks.
CNN Money:
  • National Debt: 'Time for Gridlock is Over'. As lawmakers continued to butt heads over how much spending should be cut over the next seven months, a few senators on Tuesday were trying to keep the focus where they think it belongs -- the next several decades. "The time for gridlock is over. We do not have time to go around the bush and around the bush and around the bush to debate the specifics of our perfect solutions," said Republican Sen. Mike Crapo.
  • Low, Low Prices: Target(TGT) Beats Wal-Mart(WMT).
The Hill:
  • Senator Majority Harry Reid(D-Nev.) Attacks GOP Budget for Trying to Cut Money for Nevada's Cowboy Poetry Festival. Senate Majority Harry Reid (D-Nev.) slammed the Republicans' budget proposal on Tuesday as 'mean-spirited' and complained it would eliminate money for a cowboy poetry festival that brings tens of thousands of tourists to Nevada. “The mean-spirited bill, H.R. 1, eliminates National Public Broadcasting," said Reid in a floor speech. "It eliminates the National Endowment of the Humanities, National Endowment of the Arts. These programs create jobs. The National Endowment of the Humanities is the reason we have in northern Nevada every January a cowboy poetry festival. Had that program not been around, the tens of thousands of people who come there every year would not exist.” The Republican plan would slash $57 billion from the budget for the remainder of fiscal year 2011. That budget is likely to face a vote in the Senate on Tuesday evening.
Politico:
  • 'Sting' Boosts Efforts to Ax NPR Funds. Within hours after a video emerged showing NPR’s fundraising chief disparaging tea partiers as “racist” and saying the broadcaster would be better off without federal funding, Republicans in Congress seeking to de-fund NPR said they’d be only too happy to oblige. “We agree that NPR and PBS would be fine without taxpayer subsidies,” said Sen. Jim DeMint (R-S.C.), a tea party favorite who just last week introduced legislation to stop taxpayer subsidies to public broadcasting. “Forcing taxpayers to give public broadcasting hundreds of millions of dollars makes little sense when we’re facing a $14 trillion debt and there are already thousands of educational and entertainment choices in the media.
USA Today:
  • Smart Meters Raise Suspicions About Accuracy. Coast to coast, from Maine to Marin County, Calif., the number of homes being outfitted with smart meters that keep a close eye on homeowner electricity use is on the rise. And so is the number of folks who think smart meters are a dumb idea.
Reuters:
  • Libya No-Fly Zone Should Not Be U.S.-Led Effort - Clinton. The United States wants to see the international community support a no-fly zone over Libya, U.S. Secretary of State Hillary Clinton said on Tuesday, saying it was important it was not a U.S.-led effort. "We want to see the international community support it (a no-fly zone)," she told Sky News. "I think it's very important that this not be a U.S.-led effort because this comes from the people of Libya themselves. This doesn't come from the outside, this doesn't come from some Western power or some Gulf country saying 'This is what you should do.'" She also said it was important that the United Nations make the decision on what to do about Libya, not the United States.
  • Michigan Workers Jam Capital to Protest Union Plan. In a scene reminiscent of Wisconsin, hundreds of pro-union protesters jammed the Michigan state Capitol on Tuesday to oppose a bill that would give emergency managers authority to break labor deals to revive failing schools and cities.
  • CFTC Swaps Trading Plan May Stifle Market - Traders.
  • Ships Entering U.S. to Face New Ballast Water Rules. To keep new invasive species out of U.S. waters such as the Great Lakes, the United States must enact stricter rules on treating ship ballast water under a settlement reached on Tuesday with environmental groups. Under the agreement, the U.S. Environmental Protection Agency will settle on new rules by November that will go into effect in December 2013 to give shippers the chance to comply, conservation groups said. "This settlement should prompt EPA to treat 'living pollution' as aggressively as it would an oil spill or toxic release," said Thom Cmar of the Natural Resources Defense Council, one of the groups involved in the settlement.
  • Finisar(FNSR) Sees Weak Q4, Shares Plummet. Network equipment maker Finisar Corp forecast a dismal fourth quarter, blaming a surprise inventory pile-up at telecom equipment makers in China, and its shares plunged 38 percent in extended trading. The lower-than-expected outlook casts a pall of gloom on the fiber optics sector, which surged last year as wireless carriers built new LTE networks and invested in optical switches to carry a surge in wireless traffic. Finisar sells components to manufacturers of fiber optic switches that are used to manage and unclog telecom networks. Shares of larger rival JDS Uniphase(JDSU) fell 15 percent to $21.50. Oplink Communications(OPLK) slipped 11 percent, while Occlaro(OCLR) was down 14 pct at $14.31. The weak outlook from Finisar marks the second bad news for the sector in as many days, after fiber optics switch maker Ciena surprised investors with a weak second-quarter outlook. . "Things that we had forecast only at the end of last year...all of a sudden have been reduced dramatically," a Finisar executive said in a conference call with analysts. The company expects reduced order rates and capacity demands in the fourth quarter, but said it would be surprised if the inventory correction lasted three quarters. It added the problem is an industry-wide one now and was not limited to just one customer in China.
  • Texas Instruments(TXN) Earnings Target Misses Street. Texas Instruments Inc issued a current-quarter earnings target that was slightly below Wall Street estimates, blaming weaker-than-expected demand last month for chips used in personal computers. Shares in TI, which brings in 15 percent of its revenue from the PC market, fell almost 1 percent in after-hours trade, canceling almost all of their gains during regular trading.
  • Honeywell(HON) Sees Q1 at Upper End of View; To Buy Back Shares. Diversified U.S. manufacturer Honeywell International Inc expects first-quarter sales and profit to be at the high end of its previously provided outlook, and authorized a $3 billion share buyback program. Honeywell, which also reaffirmed its 2011 forecast, said it would buy back shares during 2011 to offset the dilutive impact of employee stock-based compensation plans.
Financial Times:
Toronto Star:
  • Yemeni Army Fires at Student Protesters, Wounding 98. The Yemeni government escalated its efforts to stop mass protests calling for the president’s ouster on Tuesday, with soldiers firing rubber bullets and tear gas at students camped at a university in the capital in a raid that left at least 98 people wounded, officials said. The army stormed the Sanaa University campus hours after thousands of inmates rioted at the central prison in the capital, taking a dozen guards hostage and calling for President Ali Abdullah Saleh to step down. At least one prisoner was killed and 80 people were wounded as the guards fought to control the situation, police said.Yemen has been rocked by weeks of protests against Saleh, inspired by recent uprisings in Egypt and Tunisia that drove out those nations’ leaders. Saleh, a key U.S. ally in the campaign against Al Qaeda, has been in power 32 years.
Xinhua:
  • Egypt's Muslim-Christian Clash Escalates. Clashes between Egyptian Muslims and Coptic Christians escalated on Tuesday after Coptic protestors blocked a main road in Cairo for more than two hours. Hundreds of salafists, or conservative Muslims, claimed for regaining two women who they believed were held in a church after they proclaimed their Islam belief, state MENA news agency reported. The salafists stressed the importance of not changing the second article of the constitution as the Copts called on in the nationwide demonstration, which affirms that Islam is the only source for jurisdiction. The clashes between salafists and Copts in the Autostrad road in southeast Cairo left at least one Copt dead and five people wounded, according to local media. Meanwhile, thousands of Coptic protestors continued a sit-in for the fourth day Tuesday in front of the Egyptian Radio and TV building protesting over a church that was torched in a village in Helwan Governorate, south of Cairo. They demanded ending of the sectarian clashes against them and rebuilding the burnt Shahedain church. They also called for providing protection for Copts and securing their houses along with paying compensations for the losses inflicted on them. A fight among members of a Muslim family on Friday night over the romantic relationship between a Muslim girl and a Christian merchant left two dead, including the girl's father. After the funeral, crowds of Muslims from the village directed to the Shahedain church and broke into the church before they torched it. Egypt's new Prime Minister Esssam Sharaf promised the Coptic protestors to reclaim the land of the burnt church and rebuild it. Any marriage relationship between Muslim and Christian is forbidden according to Islamic jurisdictions.
China Securities Journal:
  • China may introduce a new round of control measures on the real estate market if the property prices do not stabilize, citing Jiang Weixin, minister of Housing and Urban-Rural Development. The government may work out more detailed measures on how to contain the rises in property prices, Jiang said.
China Digital Times:
  • Latest Directives From the Chinese Ministry of Truth, March 2-7, 2011. The following examples of censorship instructions, issued to the media and/or Internet companies by various central (and sometimes local) government authorities, have been leaked and distributed online. Chinese journalists and bloggers often refer to those instructions as “Directives from the Ministry of Truth.” CDT has collected the selections we translate here from a variety of sources and has checked them against official Chinese media reports to confirm their implementation. State Council Information Office: In China 94% Are Unhappy; Top-Heavy Concentration of Wealth March 7, 2011 From the State Council Information Office: All websites are requested to immediately remove the story “In China 94% Are Unhappy; Top-Heavy Concentration of Wealth” and related information. Forums, blogs, micro-blogs, and other interactive spaces are not to discuss the matter.
Evening Recommendations
Janney Montgomery:
  • Rated (RUE) Buy, target $38.
  • Reiterated Buy on (DKS), target $44.
RBC Capital:
  • Rated (DISH) Outperform, target $30.
Night Trading
  • Asian equity indices are -.50% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 105.50 -3.0 basis points.
  • Asia Pacific Sovereign CDS Index 116.75 -2.75 basis points.
  • S&P 500 futures -.10%.
  • NASDAQ 100 futures -.19%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (VC)/1.29
  • (MW)/.19
  • (JAS)/1.53
  • (CWTR)/-.25
  • (MCP)/-.02
  • (HRB)/.03
  • (NAV)/.26
  • (AEO)/.43
  • (KFY)/.30
  • (PLCE)/1.00
Economic Releases
10:00 am EST
  • Wholesale Inventories for January are estimated to rise +.9% versus a +1.0% gain in December.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,000.000 barrels versus a -364,000 barrel decline the prior week. Distillate supplies are expected to fall by -500,000 barrels versus a -751,000 barrel decline the prior week. Gasoline inventories are estimated to fall by -1,500,000 barrels versus a -3,590,000 barrel decline the prior week. Finally, Refinery Utilization is expected unch. versus a +1.5% gain the prior week.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The weekly MBA mortgage applications report, $21 Billion 10-Year T-Notes Auction, Citi Resources Conference, Wedbush Morgan Tech/Media/Telecom Mgmt Access Conference, UBS Tech Conference, CSFB Equipment/Semis/Networking Conference, UBS Autos Conference, Citi Financial Services Conference, BofA Merrill Consumer Conference, (HRS) analyst meeting, (BHI) analyst conference, (XOM) analyst meeting and the (HON) investor conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and automaker shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 100% net long heading into the day.
1 comments

Tuesday, March 08, 2011

Stocks Rising into Final Hour on Lower Energy Prices, More Economic Optimism, Short-Covering, Fund Inflows

Posted by Gary .....at 3:45 PM

Broad Market Tone:
  • Advance/Decline Line: Substantially Higher
  • Sector Performance: Almost Every Sector Rising
  • Volume: Slightly Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 19.51 -5.57%
  • ISE Sentiment Index 137.0 +41.24%
  • Total Put/Call .91 +2.25%
  • NYSE Arms .81 -36.28%
Credit Investor Angst:
  • North American Investment Grade CDS Index 83.85 -.78%
  • European Financial Sector CDS Index 117.58 -1.20%
  • Western Europe Sovereign Debt CDS Index 175.17 bps unch.
  • Emerging Market CDS Index 203.52 -2.44%
  • 2-Year Swap Spread 20.0 unch.
  • TED Spread 20.0 -1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .10% unch.
  • Yield Curve 283.0 +2bps
  • China Import Iron Ore Spot $172.80/Metric Tonne -.69%
  • Citi US Economic Surprise Index +91.20 -2.0 points
  • 10-Year TIPS Spread 2.57% +4 bps
Overseas Futures:
  • Nikkei Futures: Indicating +65 open in Japan
  • DAX Futures: Indicating +11 open in Germany
Portfolio:
  • Higher: On gains in my Retail, Biotech, Tech and Medical longs
  • Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short
  • Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 moves strongly higher off its 50-day moving average, despite just a slight pullback in oil, eurozone debt angst, emerging markets inflation fears and commodity stock weakness. On the positive side, Airline, Road&Rail, REIT, Homebuilding, HMO, Hospital, Bank, Telecom, Computer Service, Computer, Software and Defense shares are especially strong, rising 2.0%+. Small-cap and Cyclical shares are strongly outperforming. (XLF) and (IYR) have also traded well throughout the day. The Transports are surging back above their 50-day moving average on volume. The Saudi sovereign cds is falling -.41% to 128.81 bps and the Israeli sovereign cds is falling -1.68% to 152.59 bps. Moreover, the UK sovereign cds is falling -2.36% to 56.0 bps. The US dollar is catching a bid and looks poised for further near-term gains. The UBS-Bloomberg Ag Spot Index is down -.35%, oil is down -.2% and copper is gaining +.34%. On the negative side, Coal, Oil Tanker, Energy, Oil Service and Ag shares are down on the day. Tech is also underperforming. The avg. US price for a gallon of gas is up another .02/gallon today to $3.53/gallon. It is now up .41/gallon in 19 days. Weekly retail sales rose +2.0% last week versus a +2.6% gain the prior week. This is the smallest weekly gain since the week of March 2, 2010, which is a negative. China Iron Ore Spot is down -10.7% in just over 2 weeks. As well, the US scrap steel benchmark has fallen -6.0% over the last week. Equity investor complacency regarding the deteriorating situation in the Mideast and the eventual negative effects of soaring commodities remains high. Speculation by funds in oil is at very extreme levels and likely caps significant near-term upside in the commodity barring any new developments in the region. Banks, Airlines and Homebuilders are leading the way today. I would like to see better quality leadership and volume on further gains. US stocks want to work higher on any stabilization in energy prices, however oil is not trading like a meaningful top is in place, as of yet. I expect US stocks to trade mixed-to-higher into the close from current levels on lower energy prices, more economic optimism, fund inflows, short-covering and bargain-hunting.

0 comments

Today's Headlines

Posted by Gary .....at 3:05 PM

Bloomberg:
  • Crude Oil Declines as OPEC May Hold Emergency Meeting Amid Libyan Turmoil. Crude oil fell as members of the Organization of Petroleum Exporting Countries discussed whether to hold a special meeting and Libyan rebels prepared an offensive to regain a town. Crude slipped as much as 2 percent after Kuwait’s oil minister said OPEC members are considering whether to convene an “urgent meeting.” Futures trimmed losses as opponents of Libyan leader Muammar Qaddafi sought to recapture Bin Jawad. Goldman Sachs Group Inc. and Bank of America Merrill Lynch today raised oil-price forecasts. “OPEC may schedule a meeting to discuss increasing production,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The OPEC news and signals that the U.S. may release some strategic reserves is making some investors think twice about being long.” Crude oil for April delivery dropped 87 cents, or 0.8 percent, to $104.57 a barrel at 9:41 a.m. on the New York Mercantile Exchange. Futures touched $106.95 yesterday, the highest intraday price since Sept. 26, 2008.
  • Greek Bond Yields, Swaps Climb to Records Before EU Leaders Discuss Crisis. Greek 10-year bond yields and credit-default swaps surged to a record as borrowing costs increased at a debt sale and before European leaders begin meetings aimed at containing the sovereign debt crisis. Spanish bonds also slid as the government sold debt through banks. Greek bond losses extended declines to a ninth day after the nation’s credit rating was cut by Moody’s Investors Service yesterday. Portuguese 10-year bonds fell for a second day before a notes auction tomorrow. German 10-year bonds dropped amid speculation the nation’s economic growth will add to pressure on central bankers to increase interest rates. “There is quite a lot of peripheral supply that needs to be digested and apparently we’re struggling to find more buying interest at these levels,” said Marcel Bross, a fixed-income strategist at Frankfurt-based Commerzbank AG. “We have these important meetings coming up, where we see some potential for disappointment.” The yield on 10-year Greek bonds jumped as much as 52 basis points to 12.85 percent, the most since Bloomberg began collecting the data in 1988, with the increase in yields the biggest since Oct. 27. The extra yield investors demand to hold the securities instead of German bunds widened to as much as 956 basis points, the most since Jan. 10. The euro fell 0.4 percent to $1.3912. Credit-default swaps insuring Greek government bonds rose five basis points to an all-time high 1,037 basis points, meaning it costs $1.04 million annually to insure $10 million of debt for five years.
  • Asia Confronts Oil-Price Shock as Central Banks Pressured to Raise Rates. A jump in crude oil costs in excess of 20 percent in the past two weeks is escalating the danger of inflation in Asia, where central banks are already grappling with consumer price pressures fueled by job and spending gains. The Bank of Thailand and Bank of Korea will each raise key interest ratesthis week by a quarter percentage point, median estimates in Bloomberg News surveys of economists show. Malaysia may also be approaching the end of its pause in boosting borrowing costs, as four of 17 analysts polled see a March 11 move, the highest such share since the last increase, in July. “The region is particularly prone to food and oil price shocks as a greater percentage of household income is spent on food and transportation,” said Vishnu Varathan, an economist in Singapore at Capital Economics (Asia) Pte.
  • Icahn's Activist Funds to Return Fee-Paying Capital to Outside Investors. Billionaire Carl Icahn will return all of the fee-paying capital in his hedge funds, marking the end of a six-year experiment in which he sought to use outside money to gain influence over the companies he targeted for change. Outside investors had already withdrawn much of their money from Icahn’s hedge funds, leaving just $1.76 billion of fee paying assets, according to a copy of a client letter that Icahn filed this morning with the U.S. Securities and Exchange Commission. One reason for the withdrawals from the $7 billion fund group is that it didn’t bar investors from cashing out during the 2008 financial crisis, Icahn said in the letter. “While it may sound ‘corny’ to some, the losses that were incurred by investors in our funds in 2008 bothered me a great deal more, in many respects, than my own losses,” Icahn said in the letter. “I do not wish to be responsible to limited partners through another possible market crisis.”
  • Confidence at U.S. Small Companies Climbs to Three-Year High, Survey Shows. Confidence among U.S. small companies rose in February to the highest level in three years as hiring and sales expectations increased, a survey showed. The National Federation of Independent Business’s optimism index climbed to 94.5, the highest since the recession began in December 2007, the Washington-based group said today in a statement. The reading compares with the average 100.7 during the previous expansion that started in November 2001. Hiring plans rose to the second-highest level since September 2008, a sign employment may pick up in coming months. At the same time, earnings expectations remained negative, and fewer businesses said it was a good time to expand.
  • Bank of America(BAC) Says Home-Loan Business in 'Recovery Mode'. Bank of America Corp. (BAC), the largest U.S. lender, said its residential mortgage business is in “recovery mode” after contributing to a net loss last year and will be “transitioning to business as usual” in 2012. The stock advanced in early trading. The commercial- and investment-banking businesses are already transitioning this year and may post what the company considers normalized earnings in 2012 and 2013, Charlotte, North Carolina-based Bank of America said today in a slide show on its website.
  • Iran opposition leader Mir Hossein Mousavi, whose whereabouts had been unclear for three weeks, is under house arrest, according to his website.
  • Louisiana Sues BP(BP), Partners for $1 Million a Day Over Spill. BP Plc (BP/) and its partners in the Gulf of Mexico well that blew up should pay the state of Louisiana at least $1 million a day for damages caused by the worst oil spill in U.S. history, state Attorney General Buddy Caldwell said in a lawsuit against the oil company.
  • McDonald's(MCD) February Same-Store Sales Rise 3.9% on Asia. McDonald’s Corp. (MCD), the world’s biggest restaurant chain, reported sales rose 2.7 percent at stores open at least 13 months in the U.S. last month, missing analysts’ estimates. Analysts had projected a gain of 4 percent, according to the average of three estimates compiled by Bloomberg. Global comparable sales increased 3.9 percent, the Oak Brook, Illinois- based company said today in a statement. Analysts had estimated same-store sales would rise 3.8 percent.
  • Cotton Futures Plunge by Daily Limit After Rally to Record Seen Overdone. Cotton dropped by the daily maximum, slumping for the first time in eight days, as recent gains to a record were seen as exaggerated and investors sold the fiber to lock in profits. May-delivery cotton fell 7 cents, or 3.3 percent, to $2.0714 a pound on ICE Futures U.S. Before today, the price gained 21 percent in seven days, the longest rally since September 2009.
  • Clean-Energy Guarantees Should Be Probed for Record-Keeping, Lawmaker Says. Lax record-keeping at the U.S. Energy Department underscores the need for an investigation into the agency’s loan guarantees for clean-energy projects, the head of the House Energy and Commerce Committee said. The Energy Department’s inspector general said in a report released yesterday that the department’s loan guarantees haven’t met U.S. standards for record-keeping. “The lack of accountability identified by the IG is exactly why Congress is investigating this loan program,” Fred Upton, the Michigan Republican who heads the energy panel, said today in an e-mailed statement.
  • Europe May Face More Ratings Cuts, Greek Default, S&P Says. Some countries in the euro region may have their credit ratings cut further while a Greece debt default is a “possibility,” said Moritz Kraemer, managing director of European sovereign ratings at Standard & Poor’s. Asked if the worst was over for the region’s sovereign credit-rating outlook, Kraemer said: “I wish I could say yes, but the answer is no.” “We still have a number of countries with a negative outlook or CreditWatch negative, indicating their credit ratings may be going down further,” Kraemer said in an interview in London. “Trigger points for that could be slippage in fiscal consolidation and structural reforms, but also decisions that will be taken at the European level later this month.”
  • Senate Said to Be Nearing Bill to Delay 'Swipe' Fee Rules. A bipartisan group of U.S. senators is drafting legislation that would delay the implementation of debit-card “swipe” fee rules that banks say would cost them billions of dollars in annual revenue, according to two Senate aides with knowledge of the plan.
  • BofA Segregates Almost Half of its Mortgages Into 'Bad Bank'. Bank of America Corp. (BAC), the biggest U.S. lender by assets, is segregating almost half its 13.9 million mortgages into a “bad” bank comprised of its riskiest and worst-performing “legacy” loans, said Terry Laughlin, who is running the new unit. “We are creating a classic good bank, bad bank structure,” Laughlin told investors at a meeting in New York today. He was promoted last month to manage the costs of resolving disputes stemming from the company’s 2008 purchase of Countrywide Financial Corp. “We’re going to get after this, we’re going to do it the right way and we’re going to put it to bed in the next 36 months,” he said.

Wall Street Journal:
  • Gadhafi Loyalists Launch New Attacks. Forces loyal to Col. Moammar Gadhafi have launched a new round of attacks on rebel positions, keeping up a counteroffensive to prevent the opposition from advancing toward the capital Tripoli, as Col. Gadhafi's inner circle is debating whether the man in charge of Libya since 1969 should remain in power or relinquish his role.
  • Expectations Low for EU Talks. Market expectations that Europe's leaders will agree on a strong and flexible bailout fund to resolve the continent's debt crisis aren't likely to be met, said two senior government officials from within the currency area. The proposals to beef up the European Financial Stability Facility, or EFSF, are encountering growing German intransigence after Berlin failed to achieve its own agenda for reforming euro-zone economies. In recent meetings, German officials have shown an increasing unwillingness either to strengthen Europe's temporary bailout mechanism or to augment its powers, as Germany is forced to compromise on its own program
CNBC.com:
Business Insider:
Zero Hedge:
Atlanta Journal Constitution:
  • Christians and Muslims Clash in Egyptian Capital. Clashes between Christians and Muslims have escalated in a day of violent protests in Egypt's capital. Soldiers fired shots in the air to break up the clashes that broke out south of the capital while people burned tires and smashed parked cars. Earlier Tuesday, thousands of Christians demonstrated in two other Cairo locations against perceived persecution by the country's Muslim majority. Hundreds of Egyptian women demanding equal rights and an end to sexual harassment also were confronted by men who verbally abused and shoved them in a separate protest on Cairo's central Tahrir Square. Tensions remain high nearly a month after mass protests ousted President Hosni Mubarak.
Boston Globe:
AppleInsider:
  • Apple(AAPL) Ships Over 1 Million MacBook Airs in New Notebook's First Quarter. Concord Securities analyst Ming-Chi Kuo tells AppleInsider that his most recent checks in Asia indicate Apple shipped a total of 1.1 million of its 11- and 13-inch MacBook Airs during the three-month period ending December, making the new breed of ultra-thin portables one of the company's most successful Mac product launches ever. Those figures are about 63% higher, or 400,000 units more, than the 700,000 units that Kuo had initially estimated.
Pittsburgh Post-Gazette:
  • Corbett Swings Budget Ax at Schools, Colleges. Making good on his promise not to raise taxes, Gov. Tom Corbett this morning released a $27.3 billion budget, slashing $866 million out of current spending through cuts in virtually every spending area. The cuts bring spending back to 2008-09 levels.
TechWhack:
Politico:
  • Freshman Democrat Joe Manchin: Obama Has 'Failed to Lead' on Budget. West Virginia Sen. Joe Manchin ripped President Barack Obama on his budget proposals in a Senate floor speech Tuesday, a rare rebuke from a freshman Democrat who clearly is worried about the politics of deficit spending as he faces a tough reelection in 2012. Manchin charged the president with failing to lead the way in reducing spending, while also criticizing Republicans for offering “partisan” and “unrealistic” budget proposals. “Why are we doing all this when the most powerful person in these negotiations — our president — has failed to lead this debate or offer a serious proposal for spending and cuts that he would be willing to fight for?”
  • NPR Exec: Tea Party is 'Scary,' 'Racist'. James O’Keefe, master of the video sting, targets NPR this time, in a pretty damaging interview with Ron Schiller, NPR’s senior vice president for development, and Betsy Liley, senior director of institutional giving. O’Keefe’s compatriots, Shaughn Adeleye and Simon Templar, posed as members of a Muslim group with ties to the Muslim Brotherhood that wants to give NPR $5 million in light of the recent Republican threats to defund public broadcasting. In the course of a lunch at Café Milano, Schiller presents himself as a liberal who thinks the tea party is “scary” and that there are not enough Muslim voices on the American airwaves, nodding as his lunchmates say they are glad NPR allows Hamas's and Hezbollah's views to be heard. He claims the Republican party has been “hijacked” by the tea party, and when one of his lunch partner’s suggests that they’re “radical, racist, Islamaphobic, Tea Party people,” Schiller says, they’re “not just Islamaphobic, but really xenophobic, I mean basically they are, they believe in sort of white, middle-America gun-toting. I mean, it’s scary. They’re seriously racist, racist people.”
Reuters:
  • Iran Forces Fire Teargas to Disperse Opposition Backers. Iranian security forces fired teargas to disperse anti-government protesters in Tehran on Tuesday, the opposition website Kaleme reported. The authorities, seeking to avoid revival of the mass anti-government rallies that erupted after the disputed 2009 presidential vote, had warned against any "illegal" gatherings by the opposition after websites called for rallies on Tuesday.
Financial Times:
  • Hedge Funds Bet Oil Prices to Rise Past $150. Hedge funds are placing aggressive bets that crude prices could rise past $150 a barrel if the unrest in the Middle East spills over into Saudi Arabia, the world’s top oil exporter. The number of call options giving holders the right to buy US crude at $150 by June have surged more than 40 per cent in the past week to contracts equal to 32m barrels.
Handelsblatt:
  • European banks will have to withstand a .5% contraction of gross national product in the Eurozone this year as part of the European Banking Authority's stress tests, citing information the authority sent to banks. The simulation also includes a .2% contraction in 2012 as well as a slump in the real estate markets.
0 comments

Bear Radar

Posted by Gary .....at 2:17 PM

Style Underperformer:
  • Large-Cap Growth (+.37%)
Sector Underperformers:
  • 1) Energy -1.08% 2) Oil Service -.99% 3) Agriculture -.63%
Stocks Falling on Unusual Volume:
  • URBN, WNR, SGY, GOLD, AEO, PAA, AMT, CCI, NBS, SAN, CASY, BKCC, CCIH, VRTX, DBLE, NFLX, ROSE, LUFK, XRTX, ABM, TZA and AIZ
Stocks With Unusual Put Option Activity:
  • 1) AEO 2) GSK 3) HGSI 4) SPLS 5) ADBE
Stocks With Most Negative News Mentions:
  • 1) GRA 2) HK 3) XOM 4) GM 5) ICE
Charts:
0 comments

Bull Radar

Posted by Gary .....at 11:24 AM

Style Outperformer:
  • Small-Cap Value (+1.56%)
Sector Outperformers:
  • 1) Airlines +3.55% 2) Homebuilders +3.06% 3) Banks +2.47%
Stocks Rising on Unusual Volume:
  • AHD, FMBI, LPSN, BAC, SNP, PTR, AUY, BAS, CEO, GFI, BSFT, VRUS, JAZZ, AMAP, CSGS, HMIN, IPCM, RBCN, HIBB, KNOL, ASMI, JRCC, CPSI, EXPE, SINA, MIDD, TDSC, MWIV, SKYW, KV/A, SSI, MDC, DAL, GTY, RSH, GDOT, ARW, LUV, ALK, DKS, CTB, AVT, MTH, UAL, PNC, APL and F
Stocks With Unusual Call Option Activity:
  • 1) URBN 2) ACN 3) LUV 4) SMH 5) S
Stocks With Most Positive News Mentions:
  • 1) MDC 2) CAM 3) BA 4) APA 5) NVDA
Charts:
0 comments

Tuesday Watch

Posted by Gary .....at 12:59 AM

Evening Headlines
Bloomberg:
  • Oil Decline's for First Time in Three Days After Qaddafi Resignation Offer. Oil fell for the first time in three days after a report that Libya’s Muammar Qaddafi offered to relinquish power prompted speculation fighting may ease in Africa’s third-biggest producer. Crude dropped as much as 0.9 percent after al-Jazeera reported the proposal that guaranteed safe passage for the leader and his family. The interim rebel council rejected the offer, the TV channel said, without stating how it obtained the information. An Energy Department report tomorrow may show U.S. crude inventories rose 1 million barrels last week, according to a Bloomberg News survey of analysts. Crude for April delivery fell as much as 97 cents to $104.47 a barrel in electronic trading on the New York Mercantile Exchange, and was at $104.95 at 2:01 p.m. Sydney time. Yesterday, the contract gained $1.02 to $105.44, the highest settlement since Sept. 26, 2008. Prices are 28 percent higher from a year ago.
  • Metals Fall, Inflation Bonds Gain on Risk of Higher Rates, Unrest in Libya. Metals fell for a third day, Asian stocks fluctuated and inflation-linked bonds gained amid concern rising prices will lead China and the European Union to tighten monetary policy. Crude traded near a 29-month high after Libyan warplanes bombed rebels near an oil-export hub. Tin led the retreat, falling 2.8 percent on the London Metal Exchange, while nickel dropped 1.5 percent and lead declined 1.2 percent.
  • China's 10% Growth Threatens Inflation of 10%: William Pesek. If any generalization can be made about China-watchers, it’s that they are an optimistic bunch. They scour government data, energy-use tables and factory output, finding loads to smile about. China can grow 10 percent a year forever. Events on the streets of Beijing offer a timely reality check. There, economists can find ample evidence that China may be approaching the limits of its ability to grow sustainably. Inflation is among the forces unnerving the masses, a phenomenon not unlike the one inspiring uprisings in the Middle East. China is plenty spooked by a smattering of domestic protests. Clampdowns on the Internet and the foreign media have been relentless. Yet it’s the increasing focus of Premier Wen Jiabao on inflation that serves as a warning to those used to nothing but good news from China. Overheating risks are rising before our eyes. The economy may be at a dangerous turning point, one where jumps in asset and consumer prices derail an impressive run. For a Communist Party obsessed with social stability, inflation is a clear and present danger. And it’s not obvious that Chinese officials get that point. If they did, they would be telegraphing big increases in China’s currency at least to get a handle on inflation expectations. For all the talk of five-year plans, China is making things up as it goes along. Its rise differs from Europe’s and the U.S.’s. Aside from scale, the internationalization of finance creates control problems with which western powers don’t have to contend. Easy-money policies from Washington to Frankfurt to Tokyo are boosting Chinese real-estate values. As they climb, slums are emerging in cities including Beijing and Shanghai. Migrant workers and cash-strapped urban youth are hard-pressed to find affordable places to live. An undervalued yuan doesn’t help. China’s $2.8 trillion of currency reserves is the most striking side effect of its state- capitalism model. It amasses ever-growing piles of U.S. debt to maintain a competitive exchange rate. While successful for now, the policy has three negatives: it inflates the money supply, creates trade tensions and prolongs an addiction to exports. What worries China skeptics is how things will play out when the proverbial music stops. The quality of growth matters as much as the pace. Massive investment is needed to sustain economic expansion, yet all too much of it is going to national champions whose returns might never materialize. Is China setting itself up for a bad-loan crisis? No one can say for sure. Yet China’s growing inflation challenge complicates things. It means the gradualist approach favored in Beijing won’t work this time. The danger, say economists such as Glenn Maguire of Societe Generale SA in Hong Kong, is that inflation may rise as high as 10 percent by, say, the third quarter. That would cause households tremendous pain and fuel social discontent. China has made it clear that it won’t tolerate the smallest of protests. It also is warning foreign journalists about covering these gatherings and blames reporters for causing trouble, not unlike leaders from Egypt to Libya. The latest chapter of the so-called Jasmine Revolution involves people showing their frustration by taking strolls in major Chinese cities on Sundays. Blaming the media is rarely a promising sign. It suggests a government more concerned with spin than substance. China should redouble efforts to treat the underlying cause of the turmoil, not the symptoms. China’s people want less inflation, more government accountability and greater egalitarianism. Its leaders want to blame the messengers. Not a good omen, as economic indicators go.
  • Overseas investors sold the most Indonesian stocks in about six year after the central bank kept borrowing costs unchanged, raising concern that policymakers aren't doing enough to fight inflation. Overseas investors sold a net $672 million of shares on March 4, the most since May 30, 2005, stock exchange data show. The Jakarta Composite Index has lost 3.8% this year amid concern policy makers have fallen behind regional peers in taking steps to curb inflation. Faster inflation exacerbated by a surge in crude oil has threatened to sap consumer spending, which accounts for about two-thirds of the Indonesian economy. Inflation accelerated to a 21-month high of 7.02% in January.
  • Obama Said to Pick Commerce Secretary Locke as China Envoy. President Barack Obama plans to nominate Commerce Secretary Gary Locke to be the next U.S. ambassador to China, an administration official said. Locke, 61, would replace Jon Huntsman, who submitted his resignation in January to take effect April 30. Locke, who is of Chinese ancestry, is a former two-term governor of Washington.
  • U.S. Forms Criminal Task Force to Jointly Probe Deepwater Horizon Disaster. The U.S. Justice Department has formed the Deepwater Horizon Task Force to consolidate its investigation into possible criminal charges stemming from the drilling rig explosion that killed 11 workers and caused the worst offshore oil spill in U.S. history.
  • China Faces 60% Risk of Bank Crisis by 2013, Fitch Gauge Shows. China faces a 60 percent risk of a banking crisis by mid-2013 in the aftermath of record lending and surging property prices, according to a Fitch Ratings gauge. The assessment is from a macro-prudential monitor used by the ratings company, Richard Fox, a London-based senior director, said in a phone interview on March 4. Fitch sees a risk of “holes in bank balance sheets” should a property bubble burst, Fox said. China’s risk of a systemic crisis is based on the nation’s MPI3 classification, the highest of three risk categories, in a Fitch monitor begun in 2005. The indicator signaled crises in Iceland and Ireland and has been tested back to the 1980s, Fox said. Sixty percent of emerging-market countries downgraded to MPI3 face banking crises within three years, he said. China entered that classification in June. The indicator’s failures have included not sounding an alarm about the banking system in Spain, he added. The fallout from China’s lending spree may be bad loans totaling $400 billion, according to Hong Kong-based advisory firm Asianomics Ltd. China’s government is concerned at the risks posed by lending to local-government financing vehicles for stimulus projects. In his March 5 speech to lawmakers, Wen pledged a “comprehensive audit” of local-government debt, while the Ministry of Finance said separately that “local governments face debt risks that can’t be overlooked.”
  • Global Hedge Fund Assets May Hit Record $2.25 Trillion, Deutsche Bank Says. Global hedge fund assets may reach a record $2.25 trillion by year-end on increasing capital inflows and performance gains, according to a Deutsche Bank AG (DBK) annual investor survey. Capital inflows may quadruple to $210 billion this year from 2010, leading to a 10 percent expansion in assets, the survey released today showed. Assets rebounded to $1.917 trillion at the end of last year, closing in on the peak of $1.93 trillion in the second quarter of 2008, according to Hedge Fund Research Inc. data.
  • CFTC is 'Out of Step' With Global Derivative Rulemaking, Commissioner Says. The Commodity Futures Trading Commission is “out of step” with U.S. and international efforts to write rules for the derivatives market, Commissioner Jill Sommers told bankers at a conference in Washington. CFTC and Securities and Exchange Commission proposals for governing new swap-execution facilities may lead to inconsistent regulation, Sommers said today in a speech at the Institute of International Bankers annual conference in the U.S. capital.
  • Goldman's(GS) Pariah Status Fades With Broadbent's BOE Appointment. The Bank of England’s appointment of Goldman Sachs Group Inc. (GS) Senior European Economist Ben Broadbent to its Monetary Policy Committee shows governments are again looking to the firm for top decision makers, less than a year after it settled U.S. fraud claims. Broadbent, who has worked at Goldman Sachs since 2000, will replace Andrew Sentance at the end of May, the Treasury in London said yesterday. He joins a panel that has split four ways on policy for the first time since the central bank’s independence in 1997. Opposition parties last year pressed U.K. Prime Minister Gordon Brown to suspend Goldman Sachs from government work after the Securities and Exchange Commission sued the New York-based company in April. Brown said at the time he was shocked by the “moral bankruptcy” described in the complaint.
Wall Street Journal:
  • Gadhafi's Circle Debates Regime's End. Col. Moammar Gadhafi's inner circle is debating whether the man in charge of Libya since 1969 should remain in power or relinquish his role, as his government invited rebels and tribal leaders to negotiate a political solution and Western nations took steps to prepare for a possible military intervention.
  • West Shuns Libyan Crude. Big oil companies and Wall Street banks have stopped trading crude with Libya in response to sanctions against the country, threatening a near-shutdown of exports from the North African country and driving oil prices even higher.
  • Obma Restarts Terrorism Tribunals. The Obama administration on Monday lifted its freeze on new military trials at Guantanamo Bay and for the first time laid out its legal strategy to indefinitely detain prisoners who the government says can't be tried but are too dangerous to be freed. With the policy shifts, Mr. Obama is acknowledging the difficulty he has faced in trying to close the prison at the Guantanamo Bay Naval Base in Cuba, which he had ordered on his second day in office.
  • Teen Retailer American Eagle(AEO) Looking for New CEO.
  • Google(GOOG) Buys Next New Networks to Bolster YouTube Partner Program. Google Inc. (GOOG) said Monday it has acquired web-video development startup Next New Networks as part of the Internet search giant's effort to help content creators develop new videos and make money on its YouTube video site.
  • China Media Push Into the Web. As increasing numbers of Chinese go online, China's state media outlets are aggressively expanding beyond their traditional roles as propaganda outlets and competing with private Internet companies. Xinhua, the state-run news service, recently launched a search engine, Panguso.com, in partnership with state-owned telecommunications carrier China Mobile Ltd. The move comes a few months after People's Daily, a big state-run newspaper, started its own search engine, Goso.cn. The paper has also started its own Twitter-like messaging service. Meanwhile, China Central Television has launched its own online video platform, CNTV, which provides content from the monopoly broadcaster's 20 channels, as well as content from other online-video sites. But the state-run giants face challenges as they scramble to catch up with companies such as Baidu Inc., which operates China's largest search engine; Sina Corp., which runs China's most active Web-based messaging service; and Youku.com Inc., China's biggest video website.
Business Insider:
Zero Hedge:
  • Ted Kaufman's Friday Hearing Explains Everything That is Broken With the US Financial System. The insights proffered by the panelists and the witnesses, while nothing new to those who have carefully followed the generational theft that has been occurring for two and a half years in plain view of everyone and shows no signs of stopping, are truly a must read for virtually every citizen of America and the world: this transcript explains in great detail what absolute crime is, and why it will likely forever go unpunished. Key highlights from the transcript:
Forbes:
  • Obama's Recycled Energy Misdirection. President Obama has been touring the country to talk about "winning the future." And at each event, he's promised to take "clean energy from imagination to reality." Conspicuously absent from all his recent speeches, though, has been any mention of climate change, global warming or carbon-dioxide rationing. No doubt this is the result of the political fiasco surrounding his favored cap-and-trade legislation. By way of background, shortly after then-Speaker Nancy Pelosi jammed it through the U.S. House of Representatives in 2009, cap-and-trade lost favor with the American people. They recognized it for what it was: a new open-ended tax, a massive job killer and a government power grab of the energy industry. Its supporters tried to put on a brave face, but the U.S. Senate, chock full of opponents on both sides of the aisle, never even brought it up for a vote.
CNN Money:
  • GM's(GM) Painful Addiction? New Car Discounts Take Hold Again. Auto executives commonly refer to discount pricing of vehicles as an addiction: sure to bestow pleasurably higher sales volume, at least for awhile, but difficult to kick and potentially destructive over time.
  • Speculators Double Down on Oil. Big traders are betting the ranch that oil prices will keep rising, testing the pain threshold of an economy that is not exactly setting records as is. Large noncommercial speculators – firms that play the futures markets without taking delivery – added to their long position in West Texas Intermediate crude by 50,200 contracts last week, according to Commodity Futures Trading Commission data. The surge of speculative money into the oil futures pits shows that big financial players are expecting the price of WTI crude to surge well above the recent $105 or so seen last week. If they are right, it will bring $4 gasoline a step closer. That will not be good news for most consumers, though it could help some big energy traders score big paydays, thank goodness. You would hate to see the talent fail to get its due. "It does not get any clearer which way Wall Street is trying to take oil," says Stephen Schork, who writes the Schork Report energy markets newsletter in Villanova, Pa. Schork notes that speculators now own nearly six times as many barrels of oil – 268,622 futures contracts representing nearly 269 million barrels – as can be stored at the WTI trading hub in Cushing, Okla. And since the CFTC numbers released Friday only go through last Tuesday, they likely underestimate the degree of speculative fervor building in the energy markets. Olivier Jakob, who covers energy markets for Petromatrix in Zug, Switzerland, estimates that traders added 40,000 to 50,000 crude contracts to their long positions in the second half of last week. That would take them up to seven times the Cushing capacity, a level he calls "extraordinary." The speculative fervor is so remarkable that the big trading firms now have nearly twice as many long contracts open as they did in 2008, when oil spiked to $147 in the summer, a development that either foreshadowed or caused the global economic meltdown, depending on how you look at it. All this seems to point to a further rise in oil prices, which will only add to the squeeze on consumers' wallets. If oil and other commodity prices continue skyward, it is only a matter of time till the economy cries uncle, it stands to reason. $4 gasoline this spring could spell slowdown in the fall or winter, Goldman Sachs economists say. "Our analysis shows the maximum impact of oil on growth occurring with a lag of 3-4 quarters, which would point to a peak impact in late 2011," Goldman's Jan Hatzius wrote in a note to clients Friday. This is not the ideal time for a big impact from higher oil prices, what with the United States banking on a growth spurt to get out from under a massive debt burden. That said, Jakob notes that prices could also fall, believe it or not -- with equally interesting ramifications. A huge level of speculative interest "is fine as long as fighting intensifies in Libya or protests continue in Bahrain," Jakob writes, "but on any signs of conflict resolution there will be historic level of speculative investments that will need to be unwound."
Reuters:
  • Icahn Explores Sale of Federal-Mogul(FDML): Sources. Billionaire investor Carl Icahn is in the early stage of exploring a sale of Federal-Mogul Corp and has hired financial advisers to assist on the process, people familiar with the matter said.
  • IMF: Signs of Overheating in Emerging Markets. Emerging market economies that powered the global recovery may be growing too fast for their own good as inflation pressures build, a top International Monetary Fund official said on Monday. China, Brazil and other fast-growing nations have struggled to contain inflation and control heavy inflows of investment money. Although the IMF has been warning for months of the risks of price pressure, the comments by the Fund's first deputy managing director, John Lipsky, suggested the IMF is growing increasingly concerned. "For the emerging economies, growing at 6.5 to 7 percent, their margins of excess capacity have been largely used up, and as a result we're starting to see incipient signs of overheating," Lipsky told Reuters Insider in an interview. Rising oil prices have compounded the inflation problem, but Lipsky said the IMF has not cut its growth forecast because it thinks the oil price spike will prove temporary. The latest worries about supply disruptions created a "fear factor" that drove oil above $100 a barrel, which if sustained would pose a bigger threat to growth. Rising food prices are also worrisome, particularly for poorer countries where food consumes a larger percentage of household budgets, he said. The cost of food was one of many reasons behind the recent upheaval in Egypt and Tunisia. "We have to be concerned even in places where there is no political upheaval," Lipsky said. "The social strains and real difficulties for poor residents in many economies is something that has to be attended to." Zhu Min, special adviser to the IMF's managing director, said China's loan growth was too strong and addressing that was key to safely slowing down the economy. "It's a fundamental challenge," he said during a presentation to an economists' group meeting in Arlington, Virginia. "So that's a concern, overheating. In China, slowing down economic growth is important."
  • Job Outlook Muted in Developed Economies: Manpower. The employment traffic light is flashing yellow in most corners of the world. Job prospects have improved in 18 large economies from three months ago but are flat in eight countries and weaker in 13 others as employers exercise caution, unwilling to take on workers until economic growth accelerates. Hiring plans for the second quarter are unchanged in the United States and Britain, and are down in several Western European countries, according to a quarterly survey by global employment services company Manpower Inc.
  • A Million Libyans Need Aid: UK, France Seek No-Fly Zone. Britain and France said they were seeking U.N. authorisation for a no-fly zone over Libya, as Muammar Gaddafi's warplanes counter-attacked against rebels and aid officials said a million people were in need. Al Jazeera television said rebels had rejected an offer by Gaddafi to hold a meeting of parliament to work out a deal under which he would step down. With civilians surrounded by forces loyal to Gaddafi in two western towns, Misrata and Zawiyah, fears grew of a rising humanitarian crisis if the fighting continued.
  • Connecticut Hedge Fund Manager Pleads Guilty Over Ponzi Scheme. A Connecticut hedge fund manager pleaded guilty on Monday to running a multiyear Ponzi scheme that may have defrauded investors out of hundreds of millions of dollars, U.S. prosecutors said. Francisco Illarramendi, 42, pleaded guilty to five criminal counts including securities fraud, wire fraud and conspiracy to obstruct justice and defraud the U.S. Securities and Exchange Commission, U.S. Attorney David Fein in Connecticut said. Two other men, Juan Carlos Guillen Zerpa and Juan Carlos Horna Napolitano, are being detained following their arrests Thursday on conspiracy and obstruction charges, he added.
  • Urban Outfitters(URBN) Q4 Profit Misses Estimates; Shares Down. Urban Outfitters Inc's quarterly earnings missed market estimates for the first time in two years as discounts and higher shipping costs snip margins, sending its shares down 9 percent.
  • Shanghai Copper Slides, LME Extends Losses on Growth Woes.
The Australian:
  • Australia's governing Labor party's primary voter support slumped to 30%, the lowest on record, after Prime Minister Julia Gillard proposed a new carbon pricing plan, a Newspoll opinion survey shows. Gillard's voter satisfaction rating dropped to 39% in the poll of 1122 people conducted between March 4 and March 6, from 50% two weeks before, the poll said.
South China Morning Post:
  • China Slows Rate of Infrastructure Spending. Caution governs annual investment planning. The mainland expects to continue increasing spending on transport and infrastructure this year but at a more cautious pace, according to the Ministry of Transport. For its two largest ports, that means Shanghai plans moderate growth, while Shenzhen is reviewing its expansion on fears of slowing global trade.
Shanghai Securities News:
  • Around 62% of a total 175 airports in China made losses last year, citing Liang Ningsheng, an official at the country's Civil Aviation Administration.
Evening Recommendations
Citigroup:
  • Upgraded (EXPE) to Buy, target $29.
  • Reiterated Buy on (EPB), target $41.
Night Trading
  • Asian equity indices are -.25% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 108.50 +1.0 basis point.
  • Asia Pacific Sovereign CDS Index 119.25 +.5 basis point.
  • S&P 500 futures +.37%.
  • NASDAQ 100 futures +.27%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (DKS)/.72
  • (SSI)/.84
  • (BF/B)/.87
  • (FNSR)/.47
  • (DMND)/.89
  • (PEGA)/.40
Economic Releases
7:30 am EST
  • The NFIB Small Business Optimism Index for February is estimated to rise to 95.0 versus a reading of 94.1 in January.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The weekly retail sales reports, $32 Billion 3-Yr T-Notes Auction, $23 Billion 1-Year T-Bills auction, IBD/TIPP Economic Optimism Index for March, (TXN) mid-quarter update, (IBM) investor briefing, (BAC) investor conference, (NYX) investor day and the (NVDA) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
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